Modeling Supply Response in a Multiproduct Framework

product farm firm. Yet, most models of supply response in agriculture focus on aggregate (across commodities) supply or on own-price response for a single commodity. Moreover, models that do recognize multiple outputs typically specify transformation functions which impose severe a priori restrictions on the structure of production (Vincent, Dixon, and Powell). The most common functional structure assumption is separability, which ensures consistent aggregation within these structures. It allows decentralized decision making or, equivalently, optimization by stages. This opens up the possibility of multistage estimation of production decisions using consistent aggregates in the latter stages. A further assumption is nonjointness of production. The multiproduct firm can be modeled as single-product firms with inputs allocated among the different production activities. The only constraint across the individual technologies is that the total input utilization not exceed the aggregate input endowment. The objectives of this paper are to model supply response in agriculture using disaggregated output data and to test statistically key assumptions traditionally maintained in agricultural supply response studies. The technology in agriculture is approximated by a restricted profit function. Estimation of the restricted profit function model necessitates a strategy where both nonlinear equality and inequality constraints can be imposed. The restrictions used to perform the separability and nonjointness tests are nonlinear equalities. Moreover, the ability to impose nonlinear in-